Relief as home approvals stage robust recovery in August
The number of home building approvals jumped in August, pointing to a much-needed stabilisation in future construction work as the country struggles with a housing affordability crisis.
The number of home building approvals jumped in August, pointing to a much-needed stabilisation in future construction work as the country struggles to deal with an intensifying housing affordability crisis.
The new figures from the Australian Bureau of Statistics revealed 8635 houses were approved for construction in the month, a 5.8 per cent increase from July, although that remained 15 per cent down on a year earlier.
Approvals to build homes other than houses, such as apartments – a notoriously volatile number as big developments fall in and out of the data – lifted by 9.4 per cent to 4779 units in August
House building approvals peaked at over 14,000 in March 2021, on a seasonally adjusted basis, as generous Covid-era handouts – such as the HomeBuilder grant – alongside record low interest rates and booming property market supercharged construction activity.
Since then, approvals have plunged even as a surge in net migration over the past 18 months has further exacerbated already intense housing affordability issues, particularly in the rental market, where record low vacancy rates are driving rents sharply higher.
Westpac senior economist Matthew Hassan said the data pointed to a “tentative” recovery, and that “prospects for dwelling approvals still look mixed at best”.
“On the positive side, population-driven demand is clearly strong and wider housing markets are seeing a recovery,” Mr Hassan said.
“However, there still look to be significant legacy problems from the surge in construction costs – which has still to run its course – and capacity issues with a major wave of building sector insolvencies and labour shortages. High interest rates and stretched affordability will also be weighing on demand at the margin,” he said.
Economists, bureaucrats and politicians have recognised that boosting supply, rather than further lifting demand such as through subsidy programs, is key to stabilising prices and reversing a long-term trend lower in home ownership rates among younger Australians.
The Commonwealth, NSW and Victorian governments have all committed to ambitious building targets aimed at boosting the supply of affordable properties.
The ABS also separately released lending statistics which showed a similar stabilisation and recovery in new borrowing that matches the rebound in property prices this year.
The number of new owner-occupier home loan commitments lifted by 2.5 per cent in August, extending this year’s slow rebound, but still 12.3 per cent lower than a year earlier.
The average loan size to buy a home to live in dropped to $585,000 – about $32,000 off the peak in late 2022, but more than 20 per cent higher since before the pandemic. The average owner-occupier loan commitment was highest in NSW, at $722,000, according to the ABS.
ABS head of finance statistics Mish Tan said the 25,400 monthly home loan commitments was back to around pre-Covid levels after peaking at a record 40,300 at the start of 2021.
Refinancing activity declined in the month, but stayed at around record levels as the glut of households on cheap pandemic-era fixed rate loans roll off to variable rates.
“Since November 2022, the number of refinanced loans has been above the number of new owner‑occupier loan commitments. Refinancing has remained at unprecedented levels as households continued to seek better loans amid a high interest rate environment,” Ms Tan said.
The ABS lending data also showed the extraordinary pace that Australians are taking out new personal loans to pay for cars and other purchases.
Car buyers recorded a record $1.4bn in personal fixed rate loan commitments in August, or about $300m more than at the start of the year as vehicle sales continue to stay high despite the drop in other spending.
There was also $158m in personal lending approved to buy household or other personal goods, just shy of the record reached at the start of this year and more than double the $63m in personal lending commitments recorded in the same month in 2019.
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